Schneiderman commends Assembly for passing foreclosure relief bills

Press release

AG: These bills will help
protect homeowners from wrongful foreclosures and keep more New Yorkers in
their homes

Attorney General Eric T. Schneiderman praised the New
York State Assembly Wednesday for passing two important pieces of legislation
aimed at protecting homeowners in New York.

The Certificate of Merit bill (A. 5582) would help
more New York families avoid foreclosure by enacting common sense reforms to
bring greater integrity to the foreclosure process and expedite homeowners'
participation in court-supervised mediation sessions where they can negotiate
workable alternatives to foreclosure with their lender.

This joint program bill was proposed by the office of
the attorney general and the office of court administration.

The Foreclosure Fraud Prevention Act (A. 10629) is a
program bill proposed by Schneiderman that would impose criminal penalties on
residential mortgage lenders, servicers and their agents who intentionally engage
in fraudulent or deceptive conduct in the preparation, execution or filing of
false foreclosure documents. It would also impose criminal penalties on those
who, as "high managerial agents" of these businesses, are aware of
such conduct by their employees below and fail to stop it.

Both
bills are sponsored in the Assembly by Judiciary Committee Chair Helene
Weinstein, and in the Senate by Senate Co-Leader and Independent Conference
Leader Jeff Klein.

"With
these new laws, we will hold criminals accountable for their abusive
foreclosure practices and deter them from unlawfully removing New Yorkers from
their homes, and eliminate the 'shadow docket' in the courts," Weinstein said. "The filing of
foreclosure cases by lenders and their refusal to bring cases before a judge
has left thousands of homeowners in legal limbo without knowing whether the
lender even has a right to bring the action.

"Attorney
General Eric Schneiderman and Chief Judge Jonathan Lippman have recognized the
problems in foreclosure and have put forward this corrective legislation, to protect
New York's homeowners, sending a clear message: Going forward, fraud will no
longer be tolerated in foreclosure actions in New York."

Klein said,
"Long delays and incomplete paperwork have become the living legacy
of our nation's foreclosure crisis. These measures can change all of that, by
ensuring that hard working New York homeowners get their day in court. That's
why I'm proud to carry this reform package in the Senate and look forward to
passing it this year."

Lippman said,
"The new legislative package will ensure the accuracy of court documents in
residential foreclosure filings at the outset of these cases, thereby enabling
homeowners to modify their loans before it is too late. I commend the State
Assembly for passing this vital legislation, which will bring much-needed
relief to thousands of New Yorkers struggling to remain in their homes. I also
wish to extend my gratitude to Attorney General Eric T. Schneiderman for his
strong commitment to this issue and tremendous efforts to help restore the
integrity of New York's judicial foreclosure process."

The
legislative package is a top priority for Schneiderman, who has been an
advocate for homeowners who bore the brunt of the financial crisis caused by
the collapse of the housing bubble. Many homeowners in New York are still
fighting to stay in their homes, and these bills would ensure that families are
protected from careless, irresponsible or even criminal lender behavior.

Homeowners'
foreclosure cases regularly languish for months - and often years - when
mortgage lenders delay in filing critical paperwork that affirms the basis for
the foreclosing bank's right to foreclose on the property and ultimately
triggers a settlement conference - the mandatory process under New York law
that provides borrowers and their lenders an opportunity to mutually negotiate
alternatives to foreclosure, such as loan modifications or short sales.

The
AG said delays and subsequent backlogs, often referred to as the "shadow
docket," have become a major burden on both homeowners and the judicial system.
This legislative fix will require banks to file the necessary paperwork, which
ultimately triggers the settlement conference, simultaneously with the filing
of any foreclosure action, thus avoiding future delays. The office of court
administration issued a report in July of 2012, which found that 25,000
families are trapped in this legal foreclosure limbo.

"This
relatively small change will make a huge difference for families who are trying
desperately to hang on to their homes," said Kirsten Keefe of the Empire Justice Center, a statewide advocacy
group that supports the legislation.

The
Foreclosure Fraud Prevention Act would impose both misdemeanor and felony-level
penalties for lenders and servicers who knowingly engage in fraudulent
residential mortgage foreclosure practices. These fraudulent activities include
falsifying mortgage foreclosure documents - a practice that came to be known as
"robo-signing," which was rampant in New York and across the country during the
early part of the foreclosure crisis.

An
investigation of robo-signing conducted by the office of the attorney general
with 48 state attorneys general, the Department of Justice and the U.S.
Department of Housing and Urban Development, led to the signing of the National
Mortgage Settlement, a $25 billion agreement with the nation's five largest
mortgage servicers and provides for billions in mandated consumer relief,
including mortgage refinancing and principal reductions.

The
bill will create a legal definition for residential mortgage foreclosure fraud,
which will apply to mortgage lenders and servicers, and extend both to their
lower level employees and "high managerial agents." This aspect of
the bill is particularly significant because it carries the potential to bring
criminal charges against law firms and servicers that specialize in high-volume
residential foreclosure cases and knowingly engage in fraud on behalf of the
mortgage lender.

In
June, Schneiderman announced the homeowner protection program, a three-year,
$60 million initiative to fund housing counselors and legal services across New
York state. The program strives to ensure that every family facing foreclosure
has access to a knowledgeable and qualified professional advocate.

Throughout
New York, 34 legal services organizations and 59 housing counseling agencies
will receive more than $16.1 million this year to provide free foreclosure
prevention services. An additional $3.9 million has been allocated for
training, technical assistance, and other support services to assist homeowners
in foreclosure. In part because of the advocacy of HOPP-funded housing
counselors and legal services providers, more than 4,300 New York homeowners
have completed, or have active trial modifications for approximately $540
million worth of first mortgage principal reduction.

For
more information on Schneiderman's efforts to support New York families caught
in the foreclosure crisis, visit www.AGHomeHelp.com.